Results of reporting on controlled foreign companies: more than 2 billion UAH of tax revenues
State Tax Service of Ukraine summed up the campaign results for submitting Reports on controlled foreign companies for 2022 – 2023.
A total of 15698 controllers submitted 39058 Reports on 23689 controlled foreign companies registered in various jurisdictions around the world (119 countries).
Majority of Reports (28509) were submitted in the full form, and 10549 in the abbreviated form. Individuals submitted 38084 Reports, legal entities – 974.
Republic of Poland and Republic of Cyprus remain the most popular jurisdictions for registering controlled foreign companies by Ukrainians, accounting for 23.2% and 11% respectively. In addition to them, the largest share among the countries of the controlled foreign companies’ registration is occupied by the United States of America, namely 9.4%, United Kingdom – 9.1%, Republic of Estonia – 7.5%. Remaining 114 registration countries account for about 40%.
Detailed analysis of submitted Reports allows to conclude that the offshore jurisdictions account for a large share of the registration countries of controlled foreign companies. At the same time, there is a tendency towards diversification of jurisdictions, which indicates adaptation of business to the new taxation rules.
Total amount of taxes collected based on the declaration results exceeded 2 billion UAH. This demonstrates effectiveness of the new taxation system of controlled foreign companies and contributes to stabilization of the state budget in the face of economic challenges.
It is worth noting that amount of declared tax payable has increased by 246.1 million UAH since May 2024.
Number of submitted Reports (increase of +23% from 01.05.2024) and declared tax (+13%) demonstrate a significant increase in the taxpayers’ awareness of tax accounting rules for controlled foreign companies.
Introduction of a reporting system for controlled foreign companies contributes to the counteraction against tax evasion and optimization of tax obligations. In addition, this system allows for a more complete picture of international financial flows and their impact on the Ukrainian economy.
Received information will allow the Tax Service to more effectively monitor implementation of tax legislation and identify possible violations. The next step will be a detailed analysis of submitted Reports and conducting tax audits in case of detection of signs of violations and identification of controllers who have not fulfilled their reporting obligations on controlled foreign companies.
At the same time, according to current legislation, the taxpayers who independently correct errors that led to understatement of their tax liability are exempted from financial sanctions and fines until the end of martial law (Sub-paragraph 69.38 Paragraph 69 Sub-section 10 Section XX "Transitional Provisions" of the Tax Code of Ukraine).
Reminder! According to changes (Law of Ukraine №4113-IХ as of 04.12.2024), the controlling entity will not be subject to financial sanctions for violations committed in a period from January 1, 2022 and during the martial law in Ukraine until the last calendar day (inclusively) of the calendar month in which martial law is terminated or canceled, provided that the controlling entity fulfills obligations stipulated in Article 392 of the Code within six months after termination or cancellation of the martial law.
In view of the above specified, the State Tax Service emphasizes the need for controlling entities to comply with rules on controlled foreign companies, which are regulated by Article 392of the Code.
